This research service examines the Indian investment market from the perspectives of investors and entrepreneurs. It studies the market in terms of its growth over the last few years, the fundamental challenges it faces, investment themes of investors and the market trends. The study includes opinions of the investor community and recommendations to CEOs and founders of start-ups and small companies looking to attract investments for a share of equity.

Context

•The Indian investment market is examined from the perspectives of the investors and entrepreneurs in this study.•The market is studied in terms of its growth over the last few years and the fundamental challenges that face the start-up industry.•The conclusion to this study includes opinions and recommendations to CEOs and founders of start-ups and small companies looking to attract investments for a share of equity.•This research is supported by in-depth interviews with the top-level management of venture capital and angel investment companies that invest in India.•Additionally, vast secondary research on market trends has been performed to support the analysis.

Who Will Benefit?

•CEOs of companies•Start-up founders•Industry service providers•Private equity investors•Venture capital investors•Fund managers•Retail investors•Sovereign wealth funds•Hedge funds•Insurance funds and other members in the investing community

•The study is supported by primary interviews conducted with 15 investment houses in India. Opinions of start-up founders and the challenges they face have also been considered.

Key Terms

•Growth Capital/Private Equity (PE): This is a private placement investment made at a mature-stage or middle-market-stage company with the intent of enhancing its growth.•Venture Capital (VC): This is a private placement investment in an incubation or start-up firm made with the intent of growing the business rapidly and deriving short-term returns.•Angel Investment: This is typically the first investment made in a start-up company and could range from up to $2 million. Angel investors typically get the largest equity share among non-founding investors, as they also face the highest risk.

Introduction to Investments in India

There has been increasing interest in the Indian entrepreneurial market since liberalization.Led by the thrust from the “Make in India” mantra of Prime Minister Narendra Modi, India is home to the third-largest number of start-ups globally.Start-ups present a great opportunity for combining creative business models and enterprise, and next-generation entrepreneurs are keen to cash in on them.The growth of technology start-ups such as Facebook and Twitter on the global platform has sparked interest in new ventures in India since early-2000.Entrepreneurs are looking to solving ubiquitous problems through innovative solutions and technology.At the same time, angel investors and venture capitalists are eagerly looking for the “big win” through a well-planned exit strategy.This marriage of interests of the investor community and entrepreneurial ventures, coupled with a favorable political regime, has sparked new interest in the Indian market.

Industry Challenges

Bureaucracy and corruption over the years have affected India’s image adversely.Infrastructure is still poor and affects the growth of several sectors including logistics.Insufficient network of Indian entrepreneurs implies a challenge for M&A activity.Inequitable wealth distribution implies that rural-based strategies often struggle.Investors look for rapid gain, and delayed clearances and license raj systematically kill the power of novel ideas.Confidence of investors in the Indian legal system is shaky.Policy paralysis and lack of transparency of procedures has traditionally discouraged investors.

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